Despite a slight decline, Tanzania still leads region in FDI

Despite an 18% decline in FDI investments last year compared to the year before, Tanzania once again led her East African neighbours by attracting more foreign direct investments, mostly due to investment for expansion in the mining industry.

According to UNCTAD’s “World Investment Report” which came out last week, Tanzania’s FDI stood at $377 million in 2006 (down from $448 million realized in year 2005). Uganda trailed at $307m, Burundi attracted $290m, Kenya raked in only $51m while Rwanda managed $15m.

As a sub-region, East Africa saw an increase in FDI from $1 billion in 2005 to $2 billion in 2006. However, this sub-region still ranks lowest compared to other African subregions in attracting FDI.

According to the report, the FDI amounts to Africa doubled in 2 years – from $17 billion in 2004 to $36 billion in 2006. The increase is driven by investors seeking new mining locations in response to increasing global demand and rise in commodity prices. However, Africa’s share in global FDI fell to 2.7% in 2006 from 3.1% the year before. FDI outflows also rose from $2 billion in 2005 to $8 billion in 2006.

What are your thoughts about the concentration of FDI that largely goes into mining sector in Africa? Do you think Tanzania and other African countries can successfully leverage this mining and energy boom and translate it into growth in other economic sectors?

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2 Responses to “Despite a slight decline, Tanzania still leads region in FDI”

mining investments lack both backward and forward linkages to other sectors and therefore have limited positive contribution to the economy. Mining companies have off-shore accounts and in Tanzania most of them dont pay corporate tax coz they’re still making “losses” – but strangely, they’re opening new mining centres! They pay too little to government as royalty (3%)……increase in FDIs in mining sector in Tanzania is synonymous to increase in plundering of natural resources